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Assume the Position. ACT 1100 Introduction to Accounting. Summer Course. Lecturer: Troy J. Wishart. Our Confession. ACT 110 Is EASY POP!. Because, Death and Life is in the Power of the Tongue. Accounting Cycle. Books of Prime Entry. The Recording Process The transactions - PowerPoint PPT Presentation
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Assume the Position
ACT 1100
Introduction to Accounting
Lecturer: Troy J. Wishart
Summer Course
ACT 110Is EASY
POP!
Our Confession
Because, Death and Life is in the Power of the Tongue
Accounting Cycle
Books of Prime Entry
The Recording Process• The transactions• Evidencing the transactions in the form of
documents• Entering the details of each transaction in a
Primary book or Journal.• Entering the details of each transaction in
the double entry accounts
Books of Prime EntryLecture Notes 3
Books of Prime Entry
Why do we Need BOPE?• While a firm is small all double entry
accounts can be kept in one book.• As the firm grows it will be impossible
to just keep one book.• Also if we have several bookkeepers,
they could not all use the same ledger.
Books of Prime Entry
Why do we Need BOPE?• The answer to the problem is for us to
use more books• Books of Prime Entry was created to
record and summarize similar types of transactions in the same book before entering them in the ledgers.
Books of Prime Entry
Definition• Books of Prime Entry are the books
where the first entry of a transaction is made.
Definition• There is a separate book for each
different kind of transaction depending on its nature.
Books of Prime Entry
• These books give the following details: Date – The transactions should be
shown in in chronological order. Details column Folio Column – for cross-referencing
purposes Money Column
Books of Prime Entry
• These books give the following details: Date – The transactions should be
shown in in chronological order. Details column Folio Column – for cross-referencing
purposes Money Column
Books of Prime Entry
Types of Books of Original EntryoSales Day Book/Journal – for credits
salesoSales Return Day Book/Journal – for
sales returns inwardsoPurchases Day Book/Journal – for
credit purchases
Books of Prime Entry
Types of Books of Original EntryoPurchase Return Day Book – for
purchases returnsoCash Book (and discount columns) –
for receipts and payments of cash and cheques
Books of Prime Entry
Types of Books of Original EntryoPetty Cash Book – For petty cash
transactionsoGeneral Journal – For all other items
Books of Prime Entry
Books of Prime Entry
Books of Original Entry & The Double Entry Accounts
Sales Day
Book
Purchases Day Book
Sales Return
Day Book
Purchases Return
Day Book
Cash Books
General Journal
Sales Ledger
Purchases Ledger
General Ledger
The General Journal as a Books of Prime Entry
Lecture Notes 3
Books of Prime Entry
[Kieso & Weygandt, 1992:66, 71] - Journal• The book of original entry is where
transactions and selected other events are initially recorded. • Various amounts are transferred to the
ledger from the book of original entry.
Books of Prime Entry
[Kieso & Weygandt, 1992:66, 71] – Journal• In practice, transactions and selected
other events are not recorded originally in the ledger because a transaction affects two or more accounts, each of which is on a different page in the ledger.
Books of Prime Entry
General Journal[Kieso & Weygandt, 1992:66, 71]
• To circumvent this problem and to have a complete record of each transaction or other event in one place, a journal [the book of original entry] is employed.
Books of Prime Entry
[Millichamp 1992: 142,144]• The Journal is used as a book of prime
entry for any sequence of transactions, which are non-routine.
Books of Prime Entry
[Millichamp 1992: 142,144]• The Journal entries form a connected
story and thus items, which might properly be included in other books of prime entry are included for the sake of completeness.
Books of Prime Entry
General JournalToday the journal, if used at all is used for the following transactions:-
1. The purchase and sale of assets on credit
2. Opening and closing entries3. The correction of errors
Books of Prime Entry
General JournalToday the journal, if used at all is used for the following transactions:-
4. Transfer between accounts5. Any other items not recorded in
another book of original entry
Books of Prime Entry
General JournalAll credit entries [those in which no cash
changed hand] – into the journal first.Unusual Cash Entries – all such cash
transaction as purchase or sale of assets [cash here includes bank entries] – into the Journal first.
• Transactions, except for routine cash entries and sales and purchases of goods are entered first in the journal.
Books of Prime Entry
General Journal• Transactions, except for routine cash
entries and sales and purchases of goods are entered first in the journal.
Books of Prime Entry
Function of the General JournalThe function of the General Journal in bookkeeping can be described as:1. Acting as a Diary – Business events are
recorded;2. Acting as a Book of Explanation - Brief
Explanatory note or narration is given; and
Books of Prime Entry
Function of the General JournalThe function of the General Journal in bookkeeping can be described as:3. Acting as a Book of Instruction – States
which accounts to be debited and credited In Ledger
[Favell, A.J. 1977:49]
Books of Prime EntryFormat of the General Journal
Date Particulars Folio Debit CreditJan 5 Office Equipment
Bank AccountBeing purchase of computer 123 for use in the Admin Office
$650,000$650,000
LB.17 CB1
The General Journal Exercises
Lecture Notes 3
Books of Prime EntryGeneral Journal - Exercises• Nov. 1 - Buys a new delivery truck on account from Auto
Sales Ltd. $22,400• Nov. 3 - Received an invoice from Evening Graphic for
advertising $280.• Carl, a dealer in antiques, acquired the assets of a rival
business owned by Robin for $20,000. The deal was financed by Carl paying cash $10,000 and leaving the remainder on loan from Robin at 15%. The assets acquired were valued as:-
• Leasehold premises $3,000; Delivery Van $2,500; Fixtures & Fittings $1,500; Rent & Rates prepaid $500 and Stock $7,650
Purchases Day Book
Lecture Notes 3
Books of Prime Entry
Purchases Day Book• It is used record Purchases on credit
for resale.• It is also known as the Purchases
Journal, Bought Journal, Purchases Book and Bought Day Book.
Books of Prime Entry
Purchases Day Book• A separate ledger called the Bought or
Purchases Ledger is kept for the accounts of suppliers of these goods.
Books of Prime Entry
Purchases Day Book• Aggregate amount of purchase
invoices are debited to the Purchases Account in the General Ledger.
Books of Prime Entry
Purchases Day Book• The source document used to write up
the purchases day book is the invoice. An Invoice is a document, which is
made out whenever one person sells goods to the other.
Books of Prime Entry
Purchases Day Book• An invoice is made out by the seller,
and at least one copy is sent to the buyer. [Whitehead 1074:97]
Purchases Return Day Book
Lecture Notes 3
Books of Prime Entry
Purchases Return Day Book• A record of the return of goods
purchased on credit is kept in a Returns Outwards Day Book. • The information to record these
transactions is obtained from a source document called the credit note.
Books of Prime Entry
Purchases Return Day Book• A credit note is a business document,
which made out whenever one person returns goods to another. –The credit note is made out by the
original supplier of the goods; after the returned goods have reached his warehouse. [Whitehead, 1974:108]
Books of Prime Entry
Purchases Return Day Book• The functions of a credit note are:-
To evidence the acceptance of the return of goods
by the seller from the buyer.
Books of Prime Entry
Purchases Return Day Book• The functions of a credit note are:-
To evidence to a buyer that he need not pay for goods invoiced to him
because the goods have been lost in transit.
Books of Prime Entry
Purchases Return Day Book• The functions of a credit note are:-
To correct errors on invoices, such errors may be over pricing or
inclusion of goods not actually sent [Millichamp 1992:7]
Sales Day BookLecture Notes 3
Books of Prime Entry
Sales Day Book• It records the sale of goods on credit
• It is also referred to as the Sales Journal or Sales Book,
Books of Prime Entry
Sales Day Book• A separate ledger called the Sales Ledger
is kept for the accounts of customer of these goods.
• The aggregate amount in the Sales Day book is credited to the Sales Account in the General Ledger.
Books of Prime Entry
Sales Returns Day Book• A record of the return of goods sold on
credit is kept in a Returns Inwards Day book.
Books of Prime Entry
• It is important to note that the day books do not
form part of the double entry system.